Elgin, IL – Regardless of where you may live, an abundance of foreclosures and short sales have impacted homeowners nationwide. At the end of 2013, the 2007 Mortgage Forgiveness Debt Relief Act expired, everywhere except California. Congressional Senator Sherrod Brown and U.S. Rep. Bill Foster, D-Ill., introduced legislation recently to extend the Mortgage Relief Act for another two years.
What does this mean for homeowners?
Without the Debt Relief Act, homeowners who still want to seek a short sale may have to pay taxes on the forgiven balance. This means that if they owe $200,000, and they manage to find a buyer to purchase it at $100,000 and their mortgage lender agrees to accept the reduced price, the home owner could still owe tax on the remaining $100,000. Homeowners face difficult decisions ahead if no action is taken to reinstate the Debt Forgiveness Act in 2014.
Home buyers and short sales
Home buyers, be sure to check with all the parties to a property including the listing agent, the homeowners, lien holders, mortgage companies, title companies and attorneys for the sale of the property. Oftentimes, a secondary lien is on a property with a bank that will refuse to short the sale. If they refuse the deal, the contract could fall apart. The buyer is left with no deal and the home seller is no closer to moving on. Short sales can be excellent deals if buyers have enough time to sort through the difficulties.